You can bid on their players, just not all of them. I have a friend who's two levels above me, and has a 4* keeper I could bid on. I won't, because he's a slow trainer and I'm set a the position, but I could.

Again, you can only bid on 3-5* players. A player in that range could still be helpful to you. I got such a player from two levels above (4* at the time) and he's my hottest scorer right now.